Door opens for foreign banks

The Nepali financial sector is formally open for foreign banks from today. The government has set a dateline of January 1, 2010 to open the financial sector to foreigners when joining World Trade Organization (WTO). Nepal became a member of WTO on April 23, 2004.

Nepal Rastra Bank (NRB) has set a minimum capital of US$ 30 million (equal to Rs 2.23 billion) for foreign banks to open their first branch in Nepal. NRB has further provisioned $5 million capital for each additional branch. Moreover, foreign banks are also legally bound to produce a no-objection letter issued by the regulatory authority of their home country if they want to open a branch here.

As per NRB regulations, foreign banks can only do wholesale banking in Nepal. They cannot collect deposit below Rs 100 million and cannot invest below Rs 300 million. According to NRB, foreign banks wishing to expand their service in Nepal must be at least ‘B’ rated as per the evaluation of international rating agencies such as Standard & Poor, Moody’s and Fitch.

Foreign banks are also obligated to follow the rules and regulations of NRB. They can repatriate their profits to their home country after paying taxes, fees and other liabilities as per the laws of Nepal. But they have to obtain the approval of the central bank before taking away the income.

The NRB policy also states that branches of foreign banks which are scrapped or liquidated could get their licenses scrapped in Nepal too.

Like the banking sector, Nepal has two major provisions — reduction in import duty of vehicles and protection of intellectual rights (IPR) — in three years. A per the plan, Nepal should follow international rates in import duty on vehicles in January 2012 and ensure IPR a year later.
Source:THT